Why MLCC ushered in an inflection point？

 When it comes to MLCC, it must be familiar. As one of the most passive electronic components in the world, almost all consumer electronics use MLCC components, known as "rice in the electronics industry".

 MLCC full name Multilayer Ceramic Capacitor, namely multi-layer ceramic capacitor, has the advantages of large capacity value range, small volume, high voltage, high frequency and so on, mainly used in all kinds of oscillation, coupling, filtering, bypass electronic machine circuit. With the continuous progress of MLCC technology and the continuous improvement of reliability and integration, the market size continues to grow.

 According to data from China Electronic Components Industry Association, the global MLCC market will reach 114.8 billion yuan in 2021, up 12.9% year on year, and is expected to reach 149 billion yuan in 2025, with a five-year compound growth rate of 7.9%.

01 MLCC cycle bottomed out, the inflection point has reached?

 From the perspective of the market, MLCC has relatively obvious cyclical attributes, and the industry prosperity is a cyclical cycle, and the product price, demand and production capacity fluctuate accordingly.

 In 2021, benefiting from the large demand of various application markets and the supply contraction of Malaysia, a big country of MLCC output, due to the epidemic, the industrial chain has entered a state of supply competition, and industry manufacturers have raised prices and expanded production. However, in the market with the "rising sound" of passive components, with the expansion of production capacity of many MLCC manufacturers, the market supply increased significantly, coupled with the sluggish demand for mobile phones, resulting in serious inventory backlog, the MLCC market heat suddenly cooled in the second half of last year.

 One domestic MLCC producer said, " Our orders from downstream handset makers fell sharply as demand fell in the consumer electronics market fell."In this context, the world's leading MLCC plants began to cut production for standard products in the fourth quarter of last year, or to try to recover the declining performance by cutting prices.

 From an application point of view, about 70% of MLCC demand comes from the consumer electronics sector, of which audio and video equipment demand accounts for 28%, mobile phone market demand accounts for about 24%, and PC demand accounts for 18%. Vehicle MLCC is gradually becoming an important source of demand, especially in the current situation of continuous weak consumer electronics market demand, the automobile market demand is still strong, driving the rapid growth of MLCC demand.

 TrendForce Said that the first quarter of 2023 is relatively stable, and MLCC suppliers are expected to actively invest in research and development and expand vehicle product capacity throughout the year.

 On the whole, after a new round of cyclical fluctuations, the MLCC industry is now close to the bottom of the cycle, and the inflection point has been gradually established. Domestic MLCC manufacturers represented by Fenghua High-tech and Sanhuan Group have also recovered in terms of capacity utilization and overall inventory.

TrendForce Data also noted that MLCC supplier BB Ratio (order to shipment ratio) rose slightly to 0.79 in February 2023, showing a marginal improvement in demand. In the future, with the downstream demand continues to pick up, the industry boom is expected to bottom out upward.

02 Consumer MLCC is weak, car MLCC is in time

 In recent years, with the development of vehicles to the direction of intelligent and electric, including the development of three electric system, audio and video entertainment system, ADAS and autonomous driving system, have greatly promoted the growth of vehicle MLCC.

 According to Li Wenjun, sales director of Sanhuan Group, the automotive electronic device market continues to rise. With the evolution of automotive electronic and electrical architecture, the number of MLCC used by single vehicle powertrain system is 450-2500, which is positively correlated with the degree of vehicle electrification; the number of ADAS, safety system, comfort system, entertainment system and other systems is 4300-18,000.

 According to the industry research information, the Tesla ADAS system uses 3,600 MLCC per vehicle. In the future, with the progress of L3-L5 level higher level autonomous driving technology, the use of MLCC will further increase.

 It can be seen that the rise of the automobile industry has brought a new turnaround to the passive device market, including MLCC. It is not difficult to understand why cars are called "MLCC collections" in the industry.

 Chen Taiming, chairman of Guoju, once said that companies with standard business will work very hard in the next two years. The failure of the standard MLCC product market has driven the major MLCC manufacturers to gradually develop in the direction of high capacity, high frequency and high reliability, and has also continuously increased the proportion of industrial and automotive standard products.

 Based on this, Murata, Samsung Electric, Sun Electric, TDK and other head manufacturers have begun to adjust the production capacity, gradually exit the production capacity of general products, focusing on small size, high capacity, MLCC products.

 In May 2022, TDK announced that it has decided to expand the MLCC capacity in Japan. Construction is scheduled to start in March 2023 and start mass production in September 2024. The monthly capacity will increase by 5 billion to 8 billion units.

 Kyocera plans to build a new production facility in its national branch plant in Kagoshima in February, which is expected to be completed and put into operation in May 2024, aiming to increase its MLCC capacity by 20% to achieve an annual output of 20 billion yen after delivery.

 Samsung SEMCO will cooperate with the group's 2023 strategic plan to expand the global automotive market business. In 2023, the MAL production capacity of automotive MLCC will be expanded in a total of 2 billion in Busan and Tianjin.

 The production capacity expansion of Murata continues to grow by 10% every year. After the second quarter of 2023, the monthly production capacity of Fukui, Amazon and the Philippines increased by 3 billion, and the total monthly production capacity reached 25 billion, with a solid leading position.

 Under the introduction of Kemet MLCC technology, Guoju is expected to expand the monthly production capacity of 1.5 billion units in Kaohsiung in the second quarter of 2023, and is expected to increase the revenue ratio of automotive electronics from the current 18-20% to 22% by the end of 2023.

 Under the impact of low demand for standard products, Huaxin has also transferred its main resources and production capacity to high-level products such as vehicle regulation capacitors and resistance. Among them, Kaohsiung Road bamboo factory is expected to be fully used in the automotive field. At present, vehicle accounts for about 10% of the overall performance of Huaxin, and the proportion is expected to increase to 20% within two years.

Compared with the world, the growth of MLCC in China's automobile market is more obvious. It is expected that the consumption of vehicle MLCC in China will increase from nearly 150 billion in 2021 to more than 280 billion in 2025. It is worth noting that in 2022, the consumption of new energy vehicles in China will reach about 90 billion, exceeding the consumption of fuel vehicles for the first time. The compound annual growth rate of MLCC of pure electric models reached 34.74%, much higher than the average compound annual compound growth rate of 17.3% in the automobile industry. Obviously, the vehicle MLCC will be the next battlefield.

 However, compared with consumer electronics, vehicle MLCC has higher requirements and should meet the following conditions:

(1) High temperature resistance, humidity, seismic, can adapt to the extreme environment.

(2) Meet the higher product life requirements (15-20 years).

(3) The production shall pass the IATF16949 automobile quality system certification and AEC-Q and other vehicle regulation product certification.

 These conditions set a high entry threshold for the vehicle standard grade MLCC manufacturers, and participants need to have deep technical precipitation in the MLCC field. Japanese and South Korean passive device manufacturers maintain their advantage here, until recent years, domestic enterprises began to develop to the high-end field of car regulation.

 With the breakthrough of vehicle regulation technology and the release of production capacity, Fenghua High-tech became one of the first manufacturers to achieve MLCC batch shipment in China. In the first half of last year, the sales of the company's automotive electronics business increased by 28.52% year on year. At present, the cooperation with some automakers is in progress, but the product certification takes time, only through the downstream orders will be increased. It is revealed that Fenghua high-tech in 2023 car regulation product production ratio should break through to more than 10%, the future of the car regulation business proportion will be higher and higher.

 In the depressed environment of the electronics industry last year, Micro Technology went against the wind. Last year, nearly 2 billion yuan of financing will significantly increase the capacity of high capacity, car regulation and other high-end MLCC and improve the continuous research and development capacity. In the first quarter of this year, the first phase of Building B plant of Weirong Technology has been successfully put into operation. The annual capacity of MLCC has reached 600 billion yuan, and the company plans to continue to invest 12 billion yuan in the later period, and it is expected to achieve the target of annual capacity of 1.5 trillion yuan by 2028.

 Yuyang Technology expanded the MLCC project in Dongguan, among which the 5 advanced manufacturing production lines are all for MLCC. In addition, Yuyang also plans the new East China base with an annual capacity of 500 billion pieces, to build a full size and full series of MLCC production lines, applied in consumer electronics, car level, etc. The new South China Base is planned to have an annual capacity of 220 billion pieces, and produces high-end MLCC products such as 5G, medical and vehicle.

It can be predicted that in the future, the automotive electronics demand for MLCC will increase significantly, and the enthusiasm of major manufacturers to expand production will continue. Domestic manufacturers are also working to solve the lack of selectivity dilemma of domestic high-end MLCC suppliers.

The dilemma and outlet of domestic MLCC manufacturers

 The giant monopolize the market, and domestic MLCC products focus on the low-end

 The global MLCC market has always been an oligopoly, with Japanese and Korean manufacturers taking an advantage in the high-end MLCC market. According to the latest announcement in 2022, Murata occupies 31% of the global MLCC market, maintaining the leading position; Samsung Electric follows with a market share of 19%; Guoju ranks third, accounting for 15%; Sun Power, TDK and AVX account for 13%, 3% and 3% respectively.

 Although Guoju ranks third in the world with its production capacity advantage, it mainly focuses on the low-end MLCC market. Its competitiveness in the automotive and high-end industrial control markets is still not as good as that of Japanese and South Korean manufacturers. There is still a big gap between Taiwan and domestic enterprises and Japanese and South Korean manufacturers.

 The market share of local MLCC is very low, and the domestic import dependence is still relatively high, especially the high-end MLCC products are relatively dependent on imports. According to the data of the General Administration of Customs of China, in 2021, China's MLCC import volume reached 3.45 trillion, and the export volume reached 2.02 trillion. The average import price of MLCC was significantly higher than the average export price, reflecting the relatively low-end of domestic export products.

 In the face of the current situation of the industry, domestic manufacturers accelerate the expansion of production, and the demand for localization is strong.

 On the one hand, with the gradual transfer of MLCC downstream terminal and OEM market to China, and the surge of domestic substitution, the local supporting demand of the industrial chain is more urgent; on the other hand, overseas MLCC enterprises gradually withdraw from the middle and low-end market and turn to the high-end market such as vehicle regulation and industrial control. More and more local MLCC forces begin to undertake this part of the business, and domestic manufacturers are expected to seize the market share with their advantages such as product cost performance and rapid response ability. Sanhuan Group and domestic manufacturers such as Fenghua Hi-tech and others have increased investment in production capacity and optimized product structure to seize the market share of Japanese and Korean manufacturers. Taking Sanhuan Group as an example, the monthly production capacity of MLCC increased from 1.7 billion / month in 2017 to 10 billion / month in 2020. After all the projects raised in 2020 and 2021, the annual production capacity of MLCC is expected to add 540 billion.

 On this basis, domestic manufacturers need to further enter the middle and high-end MLCC market and compete with major international manufacturers.

 Automobile market, for example, the domestic MLCC manufacturers started late in the field of automobile, and automotive electronics itself threshold is higher, plus car gauge level MLCC customers is relatively stable, local MLCC manufacturers and downstream big customer cooperation depth is not enough, so high-end product scale and price strategy in the process of market competition will have more pressure.

 But as the new energy vehicle industry has exceeded expectations, At the same time, superimposed geopolitical factors, Some demand is flowing to Chinese mainland brands, For example, Fenghua High-tech has entered the supply chain system of BYD and other oEMS; Micro capacity technology also quickly launched a series of vehicle standard AEC-Q200 standard products, And entered a number of domestic traditional main engine factories and new forces in car manufacturing, In 2021, its annual production capacity of vehicle-grade MLCC is about 500 million units, The large volume is expected to begin in 2024, It is expected to increase to 300 billion units by 2028; Sanhuan Group will invest 6.385 billion yuan to make MLCC component products bigger and stronger, Strive to achieve a breakthrough in the MLCC field of high specific capacity.

In general, local manufacturers have made great breakthroughs in the middle-and low-end MLCC products, while high-end MLCC products are stepping up their replacement, and some of them have been replaced. Under the strong demand of automobile, industrial control and other booming markets, localization is the long-term theme of passive components.

 Lack of core technology, it still takes time to catch up

 In addition to the above challenges, three-ring group sales director wen-jun li said that domestic MLCC products in powder particle, medium layer, multilayer technology and high precision equipment technology barriers, in ingredients, laminated, sintering process lack of core technology, lead to domestic MLCC manufacturers behind other international manufacturers in the market competition.

 In terms of ingredients, MLCC powder is the main cost, with 35% -45% of high-volume MLCC and 20% -25% of low-volume MLCC. In the upstream ceramic powder, there are related technical and technological barriers in the production of ceramic powder, and its production and sales are mostly monopolized by foreign manufacturers.

 According to the Hongta Securities report, from the global MLCC ceramic powder market pattern, Japanese and American enterprises occupy the leading position. Sakai Chemical and Japan Chemical of Japan together have 42 percent of the market, while the U. S. Ferr 0 has 20 percent. Fuji titanium, Japan's east state titanium industry manufacturers also occupy the main market position.

 From the perspective of domestic powder market, Sanhuan Group has mastered the production method of ceramic powder in the middle and low end of MLCC, and adopts the formula and preparation technology of anti-reducing porcelain material and electronic paste. In the middle and low-end MLCC products, Sanhuan Group has gradually mass-produced, but in the high-end MLCC, due to the existence of technical barriers, it is still difficult to enter the high-end MLCC market in the short term.

In addition, in terms of lamination process, MLCC products have high requirements on the number of lamination machines and lamination accuracy. There is still a gap between the number of domestic enterprises and Japan and South Korea. At present, high-end lamination machines are still mainly imported.

 Local manufacturers ushered in the development opportunity

 China is the global * consumer electronics demand market. In 2021, the size of China's MLCC market will be 48.4 billion yuan, accounting for more than 40% of the global total scale. The strong demand for domestic replacement will become a strong driving force for the future development of domestic companies. In addition, China is also the global * new energy vehicle market, driven by the "new four modernizations" of new energy vehicles, the future automotive MLCC market will usher in an outbreak.

 For the replacement of high-end MLCC products, some insiders believe that efforts can be made to further seize the market from three aspects: first, actively learn the experience of advanced peers, strengthen product quality management, bring the performance and quality of products to the international advanced level; second, increase R & D investment, domestic quality materials and equipment manufacturers to improve the basic scientific research capability; third, strengthen the cooperation of upstream and downstream industries, and improve the overall level of MLCC industrial chain.

 In fact in recent years, MLCC market acceptance of domestic brands is more and more high, especially in this environment and the international situation, manufacturers began to realize the importance of promoting supply chain independent controllable, for product supply continuity, production and operation security and purchase price stability, terminal manufacturers began to form a complete set of supply chain to domestic enterprises, actively promote the key parts of independent control process. As the passive component with the highest market share, MLCC has a broad space for domestic substitution. Domestic manufacturers will fully benefit from the trend of domestic substitution and constantly seize the market share of international competitors.

In recent years, the proportion of domestic brands has risen rapidly, and it can be seen from the proportion of product shipped by some powerful agents. An agent revealed that in 2018, the proportion of domestic MLCC brands accounted for only 32.65% of the company, but it soared to 93.7% in 2019.

04 is written at the end

 Although the recent market noise has affected the production plan and rhythm of MLCC manufacturers, the "interweaving" of MLCC has a limited impact on the overall industry, and the expansion plan of each company also confirms the medium and long term prosperity of MLCC market from the side. Industrial and automotive MLCC has become new growth points, and the overall demand for MLCC will continue to increase.

 The growing domestic power is crucial to stabilizing the global supply chain and addressing the long-term volatility in the MLCC market. After all, the MLCC market, which was once monopolized by international brands in the past, has limited production capacity and is difficult to manage. Under the shortage of shortage and price increase, many terminal integrators with real demand suffer. Moreover, under the current international situation, the supply chain may spread unstable news from time to time. Although the complement of local manufacturers can not completely solve the above problems, it is indispensable in easing the atmosphere of the industrial chain and improving the stability of the supply chain, especially the stability of the Chinese market.

Therefore, for local manufacturers, how to "take advantage of the east wind" to strengthen their own technology, increase market share may be the most need to consider the focus.